International diversification and firm’s value: evidence from developing nations

A.N. Bany-Ariffin (Department of Accounting and Finance, Faculty of Economics and Management, University Putra Malaysia, Serdang, Malaysia)
Bolaji Tunde Matemilola (Faculty of Economics and Management, Universiti Putra Malaysia, Selangor, Malaysia)
Liza Wahid (Faculty of Economics and Management, Universiti Putra Malaysia, Selangor, Malaysia)
Siti Abdullah (Faculty of Economics and Management, Universiti Putra Malaysia, Selangor, Malaysia)

Review of International Business and Strategy

ISSN: 2059-6014

Publication date: 6 June 2016

Abstract

Purpose

This paper aims to evaluate the impact of international diversification, through the investment abroad activities of the Malaysian multinational corporations (MNCs), on their financial performance.

Design/methodology/approach

The paper applies the panel generalized method of moments (GMM) estimation technique that gives better results.

Findings

The empirical findings show that the move to invest abroad has brought a positive impact on Malaysian MNCs’ financial performance. However, in terms of a firm’s risk, the results contradict the general internationalization-risk hypothesis.

Research limitations/implications

The study focuses on the top 100 multinational firms; future researchers may extend the time period and use the entire sample of all the multinational firms.

Practical implications

Foreign investments offer rewarding returns due to cheaper labour and raw materials, competitive edge in terms of technological advancement and larger market opportunities.

Originality/value

The paper contributes to the literature using the panel GMM’s estimation that effectively control for reverse causality and serial correlation problem. The paper also contributes to the international diversification and performance relationship, in a fast-growing Malaysia.

Keywords

Citation

Bany-Ariffin, A.N., Matemilola, B.T., Wahid, L. and Abdullah, S. (2016), "International diversification and firm’s value: evidence from developing nations", Review of International Business and Strategy, Vol. 26 No. 2, pp. 166-183. https://doi.org/10.1108/RIBS-01-2014-0016

Publisher

:

Emerald Group Publishing Limited

Copyright © 2016, Emerald Group Publishing Limited

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